China's factory activity in August contracted at its fastest pace in nine months, in a sign that a persistent slowdown in economic growth extended deeper into the third quarter.
The HSBC Flash China manufacturing purchasing managers index (PMI) fell to 47.8 in August, from 49.5 in July.
This is well below the 50 level that divides growth from contraction, and the lowest reading since last November.
Qu Hongbin, China chief economist at HSBC, said the data suggested that Chinese producers were still stuggling with the effects of the global debt crisis.
“To achieve the stated policy goal of stabilising growth and the jobs market, Beijing must step up policy easing to lift infrastructure investment in the coming months,” he said.
The HSBC PMI has been below 50 for 10 straight months, reinforcing calls from analysts and investors for further measures from Beijing to support economic growth.
Analysts described the data as "plainly awful". Yao Wei, China economist at Societe Generale, said: "Clearly, the push from the government still pales in comparison to the combined force of the intensified external weakness and the shockwaves from the housing sector correction."
We think policymakers could no longer sit on the sideline. If activity data reconfirms the weakening trend, interest rate cuts will be back on table regardless of short-term food inflation outlook."
In an attempt to inject more cash into the economy, China's central bank pumped a net 278 billion yuan (£27.5bn) into China's money markets this week, the largest since early January.
The move was seen as a substitute for a cut in banks' required reserve ratio (RRR), or the amount of money banks must hold in reserve, and was designed to provide banks with much-needed liquidity to support the economy following their weakest month for lending in a year.
Last week, traders and analysts had widely expected that an RRR cut was imminent. Most believe that the central bank will still cut RRR by an additional 100 bps this year.
telegraph.co.uk
The HSBC Flash China manufacturing purchasing managers index (PMI) fell to 47.8 in August, from 49.5 in July.
This is well below the 50 level that divides growth from contraction, and the lowest reading since last November.
Qu Hongbin, China chief economist at HSBC, said the data suggested that Chinese producers were still stuggling with the effects of the global debt crisis.
“To achieve the stated policy goal of stabilising growth and the jobs market, Beijing must step up policy easing to lift infrastructure investment in the coming months,” he said.
The HSBC PMI has been below 50 for 10 straight months, reinforcing calls from analysts and investors for further measures from Beijing to support economic growth.
Analysts described the data as "plainly awful". Yao Wei, China economist at Societe Generale, said: "Clearly, the push from the government still pales in comparison to the combined force of the intensified external weakness and the shockwaves from the housing sector correction."
We think policymakers could no longer sit on the sideline. If activity data reconfirms the weakening trend, interest rate cuts will be back on table regardless of short-term food inflation outlook."
In an attempt to inject more cash into the economy, China's central bank pumped a net 278 billion yuan (£27.5bn) into China's money markets this week, the largest since early January.
The move was seen as a substitute for a cut in banks' required reserve ratio (RRR), or the amount of money banks must hold in reserve, and was designed to provide banks with much-needed liquidity to support the economy following their weakest month for lending in a year.
Last week, traders and analysts had widely expected that an RRR cut was imminent. Most believe that the central bank will still cut RRR by an additional 100 bps this year.
telegraph.co.uk
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